We Study Billionaires - The Investor’s Podcast Network - BTC127: Long-Term Holders Driving the Bitcoin Market w/ Dylan LeClair (Bitcoin Podcast)

Episode Date: April 26, 2023

Preston Pysh and Dylan LeClair cover Dylan's use of AI, programming, and on-chain analytics, what's driving the recent surge we've seen in the Bitcoin price since the start of the year, and what he's personally paying attention to in the general macro overview. Dylan is one of the lead writers and researchers at Bitcoin Magazine Pro and has some of the most interesting and well-researched takes on what's currently happening with the market. IN THIS EPISODE, YOU’LL LEARN: 00:00 - Intro 01:11 - What has Dylan been doing with Python, AI, and on-chain analytics? 14:38 - A review of charts that Dylan is finding most important. 29:23 - Does the lack of exuberance in the past cycle compress the spring for the next cycle? 41:09 - What comes next from the G7 government on the crypto enterprise? 52:39 - Dylan's thoughts on commercial real estate. 53:47 - Dylan's thoughts on Binance moving forward. Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences . BOOKS AND RESOURCES Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, and the other community members. Dylan's Twitter. Bitcoin Magazine Pro. Related episode: Listen to BTC106: FTX Failure, GBTC, Genesis DCG & more w/ Dylan LeClair, or watch the video. Related episode: Listen to BTC053: Bitcoin Derivatives & On-Chain Data w/ Will Clemente & Dylan LeClair, or watch the video. NEW TO THE SHOW? Check out our We Study Billionaires Starter Packs. Browse through all our episodes (complete with transcripts) here. Try our tool for picking stock winners and managing our portfolios: TIP Finance Tool. Enjoy exclusive perks from our favorite Apps and Services. Stay up-to-date on financial markets and investing strategies through our daily newsletter, We Study Markets. Learn how to better start, manage, and grow your business with the best business podcasts.  SPONSORS Support our free podcast by supporting our sponsors: River Toyota Range Rover Briggs & Riley American Express The Bitcoin Way Public Onramp USPS SimpleMining Sound Advisory Shopify AT&T BAM Capital Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm Learn more about your ad choices. Visit megaphone.fm/adchoices Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

You're listening to TIP. Hey everyone, welcome to this Wednesday's release of the Bitcoin Fundamentals podcast. Back by popular demand to talk about Bitcoin current events is the one and only Dylan Leclair. Dylan is one of the lead writers and researchers at Bitcoin Magazine Pro and has some of the most interesting and well-research takes on what's currently happening with the market. During the show, we cover his use of AI and programming back testing on-chain analytics. What's driving the recent surge we've seen in the Bitcoin price since the start. of the year and what he's personally paying attention to in the general macro overview.

This is a good one. So sit back and get ready because here's my chat with Dylan LeClair. You're listening to Bitcoin Fundamentals by the Investors Podcast Network. Now for your host, Preston Pish. Hey everyone, welcome to the show. I'm here with Dylan LeClair. Dylan, welcome back. Excited to have you. We got a ton to talk about. excited to be back. I think this is round three. This is round three. This is round three. Here we go.

Okay. So I just want to start off because you and I have been having a private conversation about how you're using Python and you've never had any formal training in Python through AI. So like lay it on us. Like why are you doing this? And what has the experience been so far? It's been pretty cool. I mean, everybody is, you know, I'm sure has at least. If you haven't had any experience with AI, chat, TBT, I mean, it is the hot new buzzword in town.

Wow, what a powerful tool. It is certainly mind-blowing, especially as you continue to play with it. Me, myself, right, like a data analytics guy, I look at data and visuals all day, every day. It's what I like to do, even if I'm not technically on the clock per se. I had just kind of an interest in computer science and coding, but I never took it formally as a class and decided as kind of my New Year's resolution. I was going to learn Python. I was going to learn how to code.

And behind the scenes, the whole AI thing was starting to gain traction. I mean, this has obviously been in the works for years now. But Chad GPT3 was released. And then subsequently, I think like the last month or two, four has been released. And it's mind-boggling how powerful the tool it is. I mean, like, again, like I've taken five or six, you know, replet entry level one courses, not even courses, but just little mini lessons to get my feet wet.

but like far from an expert on GitHub's or repositories or any of this stuff and just throwing the most basic of questions at this artificial intelligence thing. And in a couple of weeks, I've behind the scenes, I haven't released anything yet. I'm building out full websites, Python integrations, quant portfolio allocation models, all by just describing what I want, right? Being like, you know, I instead I plot these two things pulling from this API and have it look like this and just describing it in very complex. detail. So like, I mean, it's no special talent of mine, but what it's made me realize is that

this is going to dematerialize. And I don't even know if this isn't necessarily a hot take. Like, you know, there's a lot of like AI researchers and theorists and fan boys that, you know, have a similar take. And it maybe sounds like too, you know, very VC, change the world. Like, here's my pitch deck type of thing. But it's real. Like this is going to dematerialize millions, tens of millions and, you know, maybe hundreds of millions of kind of the white collar jobs as we think of them as us Westerners think of them specifically post-COVID, right? You're like, you know, everyone was just chucked on a laptop, Zoom University, Zoom as a job. And now it's like, whoa, this thing is going to just chop the head off of all of these entry jobs, all of these basic

jobs that can be automated. The internet's already done that in a way. But, you know, that excess, that slack hadn't really been been handled. And, you know, just some of the stuff that this is doing, right? Like, I think I said to you, you know, the days of like, you know, entry level, $200,000 a year thing, software engineer, you know, that learned how to code a year and a half ago. Those days, they're not done yet, but they're coming to an end. And I think that's just the, just the surface level, right? Like, how deep does this rapid hole go? Yeah, it's totally insane. So I was trying to run a relay for Noster. I have no idea how to go into terminal and to do that type of stuff.

I've coded a web page in HTML and done that, and it's really basic stuff. But running a relay through terminal, I had literally no clue. And so I'm getting these air messages. I'm literally copying the air messages, dropping them into chat GPT. I don't even know the right question to ask.

And I was just pasting it in there. And then it was responding back and it was saying, It looks like you are trying to do this. And if so, here's the steps you need to take. And then this is the code you need to paste into the terminal. And I'd be like, okay, my terminal is saying this. I don't even know how to close that screen to move than the next one. And I would type that into chat GPT.

And it would literally give me the prompts that I needed to navigate. Like I literally had no clue what I was doing. And this thing was assisting me through the setup. of something that I was a total idiot on. Yeah. And so I would imagine like your experience. So talk to people about like what you're trying to do with the site and like, because it's not like you're trying to do easy stuff.

Like with the charts and stuff, you're building in Python. Tell people what it is that you're trying to do. Yeah. I mean, I have a couple different things I'm working on. Some of it's for Bitcoin Magazine Pro, which is the research newsletter that I do with BTC Inc or Bitcoin Magazine. Some of it just like kind of learning as I go. like I was experimenting with creating a dollar cost averaging back test.

What's your portfolio value and your percentage return for Bitcoin, gold, SP 500, and the long bond on X date, and you know, you can select that date. And so, you know, I instructed the prompts, which honestly, I think it sounds a little bit outrageous, but I think prompting, at least in the interim, until the computer gets good enough to, and figures out I build all these things without even a human prompter, but prompting itself is almost like a real skill in art, an art form, especially as the models get better and better, it can do essentially everything. Fine-tuning that prompt is an extremely useful skill nowadays.

But I was just trying to have it build. And I have it under apps, I probably, you know, we'll put it out there in the next week or but just build a basic site, right, with just a homepage, you know, a couple different menu tabs, you know, HTML, CSS, Python, JavaScript. And again, like, I never go. at any of this. So I like I first used my terminal about a month ago saying like and it was like, you know, paste this into here. And I was like, where do I paste it? And it was like, you know, entry level questions to now, you know, having a full site. And I was like, hey, this site looks

very basic. Have it be professionally, you know, have the style be professional, make it look like an investment website. Make it look like this, this and this. Here's a website link. I like the, the look of this header and footer on this website. Copy it. And it did. And it made the formatting look extremely similar. So, like, what does this trend look like in one years? Like, I'm nothing special. I'm just building a basic level entry website. I've seen people build Chrome extensions in three hours.

Yeah. With their voice. Like, there's a thing called auto-GPT that's now plug. You can plug it into the Google search API and a couple of other APIs with the open AI API key. And it can access your full computer terminal and they can auto-correct its code without prompting, right? So like, this is, we're reaching a point where it's going to accelerate.

I mean, we've already hit an affliction point, I think. But it's going to get really, really, really crazy. You know, like we were just kind of messing around with some basic stuff. But like it's, I mean, I've gone from zero to far from hero. But, you know, instead of zero to 100 from like no experience to being, you know, somewhat competent and to no skill of my own, right? Just telling a computer in plain English, it's really powerful. So I've had conversations with people from my generation that are,

not Bitcoiners that aren't like heavily dialed into tech. And I've asked them if they've used it. And a lot of them have said, I've heard about it, but I really haven't used it yet, has been pretty much the consensus response. And then the couple that I've that I've demoed it to like on my phone or on my computer, they're literally just, they're flabbergasted whenever I have it do some of the things. I'm curious, your generation, which there's about a two-decade gap between you and me. Are most people your age using this? Like, walk me through like what the, the normie from from your generation is thinking about this, using this. Is it just pretty standard? Like, it's not a big deal. Everybody's just doing it. Or what's the deal? Yeah, I mean,

it's certainly not. It's more standard, I think. Like, people are like, oh, it's just a cool. Yeah, it's a very useful tool. I think, you know, from what I've experienced, most 99% of people are underutilizing the tool compared to how powerful it is and how, how much value it can provide if you utilize it correctly. Like I have beta access to chat GPT4 and it gives you 25 prompts every three hours and then it makes you wait for another three hours or whatever. And I hit that three hour limit like three or four times a day. Wow.

But just like just building various things, experimenting, whatever. But like a lot of college kids, like that's my social circle currently are using it. And like there's the academia is trying to catch up and like prevent it from. from being utilized, you know, cheating, plagiarism, all this other stuff. You're not stopping nothing. No. And the other thing that I found crazy about it is you can stylize anything into any person or, like, you could take a 500 word prompt and you could stylize it into any person that has

any type of public profile. So like, how in the world would colleges possibly catch people or tell them that they can't use a tool like this? Like, people just need to adapt. because if they're not using it, they're going to get steamrolled. Right? I mean, it's...

And like, you know, chat GPT, like that I'm sure everybody in their mother and tech is trying to build, you know, an AI model, right? And so like, whether this is the best iteration or Google or Elon, you know, like,

I don't think, I think that was more just hype announcement of Elon's recent thing. But, you know, I think that like this kind of artificial intelligence, general intelligence sort of thing is going to really, really accelerate. And like, this is what the last, the culmination of the last 20 years of the internet and Morse law and all of this is coming together. So, yeah, I mean, I think people are utilizing it a lot, but not nearly as much as they should.

I think it's going to completely dismantle academia and not like, you know, the legacy institutions, the harbors, the Ails, the credentials there will remain for some time being. But I remember, like, we've had some conversations over the last two years about my decision to leave school post-COVID and, you know, partially inspired by like the Jeff. booth thesis of like the internet is going to dematerialize it already has dematerialized all this information it's all available it's all for free you can learn anything you can do anything and the and the barrier to that information is zero there's it's zero cost and so like that you know contrast that with going to you know a university and the information is no longer physically domiciled at that university like it used to be 50 years ago yeah paying 50 000 a year for that is quite the tough task nowadays.

Yeah. The numbers don't make any sense whatsoever. When you look at what's accessible and more importantly, what you're able to accomplish, I mean, you can go into this thing and you'd be like, hey, give me a business plan. What would be a very lucrative business that I could start that requires very little startup capital, blah, blah, blah, right? It would give you five recommendations, something that has a competitive mode that wouldn't be impaired very easily. It will consider all that stuff, right?

And then you can just keep drilling deeper with this type of thing. I agree with you. I don't think people are understanding how insanely useful and valuable this is at their fingertips at literally like next to nothing from a cost standpoint to employ. And I think it's just a matter of time before it just takes the world by storm where it's fully embedded with like Microsoft office. and all sorts of things that. And I think once that happens, the whole world's just going to be like, what the heck just happened? Yeah.

And I think it's coming fast, man. This is coming fast, like a freight train. Yeah. And like, I mean, I don't even know if we want to go here because you could probably spend the whole time talking about it. But like the bigger idea of we're kind of at this debt super cycle. You were talking about the UBI thing before any of this obviously came into the picture. I mean, I'm sure you probably could have seen the general trend of technology.

but like what if this does what we think it does to all of these you know white collar jobs never mind the fact that you know once everyone went remote post-COVID all these tech companies and they're still realizing it today like okay why would I pay someone 150,000 a year when they could do it in Asia or 40,000 dollars and that's great income in some of these other countries right where people are just as smart and just as hungry if not more hungry to do this type of jobs. But like if this does dismantle hundreds of millions of jobs, or at least make them disposable, not like completely dismantle them, but it makes you very, very, very, very replaceable, then what does that mean for the workforce? What does that mean for

incomes? What does that mean for populace as a whole? Right. Like it's, these are like big, big, big questions. And, you know, Jeff Booth's entire thing is like these, these are two kind of immutable forces coming, coming to a head. And like, I don't think there's one politician in the world that could come up here with a straight face and say they know what the result is going to be or that everything will be fine. And if they say that, they're lying, right? Yeah, no, it is, it really is the other side of the coin of all the stuff that we typically talk about when we're talking macro and all the treasury yields and all that kind of stuff. It's this and the impact of this. I think there's very few that have not read Jeff's thesis and understand the implications of these two freight.

like moving at each other. It's wild. Hey, I'm going to pull up some charts that you sent me over and these are awesome, by the way. I really like the charts. So we'll just go through them. And for people that are just hearing the audio version of this, Dylan, if you can just kind of explain what we're looking at, I'll do it for this first one. So this first one is just Dylan sent a slide of the 2023 performance of, you know, various indexes against Bitcoin with the sharp ratio and the total return. Go ahead and give us your spill on this one, Dylan. Bitcoin's obviously had a banger start to the year up 70, 80%, whatever it is at the current recording time. And NASDAQ up 20%, equity is broadly up. It's been kind of a broad risk on

rally, but the impressive thing here, and we also compare it to gold and bonds and oil. And there's, you know, I could have added 10 other kind of indices to this. But the real like eye popper is that not only is Bitcoin outperformed everything, but on a risk-adjusted basis, it's also outperformed. So it's sharp ratio, which is, it just takes the realized volatility, the annualized, realized, the annualized, realized volatility of these assets. It's outperforming everything, right? So it just benchmarks the return relative to the risk, right? And like, this is a, you know, sharp ratio is, you know, kind of how like Wall Street would define risk. You know, for the average Bitcoiner, they might not care about the mark-to-market exchange rate

at every moment of the day. In fact, I think most don't, and we can see that through the data. But nonetheless, that's impressive. It says something. And, you know, anybody that's worth their salt in the macro world should be wondering why this is. I think if I was going to piggyback on your comment, anybody who has a sizable position doesn't, right? Yeah. And those are the ones that matter because they're the ones that are truly driving the price in the long term is they don't care about the hell.

They look at the volatility as their opportunity. every long-term holder that I've ever met that have significant amount of coins. This is an interesting metric. For people that would look at this and say, well, you're not showing last year's performance and it was down hard. Like, what would be your response to a person that would say something like that, Dylan? You know, I wish I should have included the 2022 sharp ratio for the full year. And off the top of my head, I don't know the exact numbers.

But I do know that Bitcoin, even though it was, what, it finished the year down, like 65% from, you know, January 1st to December 31st, in risk-adjusted terms, a sharp ratio. I think it honestly did better than tech basket. It did better than the long bond for much of that. So, like, this risk-free asset class that all the banks hold, that every, you know, pension fund holds on a risk-adjusted basis, right, which is what matters. Because if you can't handle the risk, then adjust your portfolio size, this is like basic stuff. It did better.

So yeah, it declined by 75% piqued to trough. But no one went all in on Bitcoin at $69,000 and then, you know, sold that 15.5. No one did that on the planet. And if you did, then you're obviously very, very unskilled, right? But like I share the stat a couple of times. It's really, really fascinating. It's like if you started dollar cost averaging into Bitcoin and like, you know, some will say dollar cost averaging isn't even the best strategy.

Like, okay, well, you can say that. But if you started dollar cost averaging at Bitcoin at, you know, quote unquote, the generational top. As of today, you're up like 17%. And your average cost basis is like 25K. So like, tell me that and be like, okay, well, you're outperforming everything despite buying the top, right? You're outperforming equities, bonds, and gold. You know, there's something there. Yeah, there really is. Let's talk through this one here. Describe this chart to people listening. Yeah. So, you know, this is the on-chain side of things. And I think this is really, really cool. Bitcoin on-chain analytics.

People will often say, you know, it's, you know, pseudoscience or it's, you know, it's opium or whatever without really understanding. We're like on-chain analytics, what the data is actually saying, right? Like, we have a transparent ledger that can immutably details every single hold, spend, every single transfer on this network. So we can see with perfect accuracy, hoddle, like, look, what the hodlers are actually doing, model behavior with these realized prices or these cost basis of short-term holders and long-term holders, which we can just say, just to keep it simple, it's a six-month cut off.

If you held longer than six months, you're a long-term holder. And there's some reasons for that, right? Just like, essentially, the longer that you hold statistically, based on what we see with the UTXO set, the more unlikely you are to spend in the future. And that six-month threshold is like a pretty significant kind of barrier after you hold for six months. You're not really likely to part with that UTXO, to part with that Bitcoin. So we can see basically with these, it's essentially like, right, it's a moving average. Think if you could have a moving average of Apple stock or the S&P 500,

but instead of just the price and the time series serving as average, it was the price and it was also the amount of shares that were traded or changed hands. And you can't see that, obviously, with a stock. You don't know. They're short selling. There's, you know, people like, it's a black box in equity markets for bonds for fixed income for legacy assets. But Vic, when it's not, we can see, we can see, you know, okay, 65% of coins

haven't moved in a year, right? And like, yeah, you know, there's on Binance, there's a million BTC of trading volume on perpetual futures in a few days, right? But like, that's just leverage. That's just wash rating. Like the actual UTXO set, we can see, we can see the data. Those are coins are not moving, right? These hollers don't really care. And what Bitcoin does, really every bear market and every bull market, every bare market, the exchange rate crashes below really every significant average cost basis you can see, whether it's the aggregate average cost basis, the cost basis of short term holders.

You can think of like the quick money, the traders, the speculators, the new investors, and the long-term holders. Like the people that come in, that step in in the bear market, that acquire Bitcoin, they don't care that they're down 60, 70% from their all-time highs. They acquire more of it and real. And no, they're not going to part with these coins for years on end. And that's what sets the bottom every time. Right. So that's what we saw at the end of 2022. Obviously, like, this thing is still correlated with the macro tides.

But like this cycle and what influences it and what leads to these cycles. I think is still surprisingly not even close to broadly understood, even in finance circles, right? It's just like this kind of esoteric thing that is volatile and doesn't make any sense to the non-Bitcoin-specific crowd. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord, and every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Forum is entering

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sign up for your $1 per month trial today at Shopify.com slash WSB. Go to Shopify.com slash WSB. That's Shopify.com slash WSB. All right. Back to the show. Dylan, when you're looking at the performance and you're looking at this quote-unquote four-year cycle, do you buy into the four-year cycle? Do you think that? And I'm just going to, I guess, let me frame the question as I'm saying this as well. When you take measurements in just days from the having to the tops and the bottoms of the previous cycles, at least the last two cycles, there seems to be just a whole lot of coincidences with respect to the number of days from the halving to the top, to the bottom. and it seems to continue to persist in this cycle that we're currently in right now.

It really feels like the bottoms in, especially when you look at all these on-chain metrics. And when you look at that bottom and you look at how many days it was from the halving event and you compare that to the previous cycle, they're eerily similar. So what are your thoughts? Is this just a coincidence? Is it what? I think the having plays a role. I think more so, and you've written some great stuff. I remember reading this back in 2019, 2020 about the mechanical aspect of the having and the difficulty adjustment and the 220, 210,000 block for a cycle, right?

And how that interplay works. I think it's increasingly, I think the cycle remains and whether it's four years or three years or five or whatever it may be. I think it's increasingly, especially as that block subsidy goes from it's going to be 6.25 per block to 3.12. five per block in 2024. I think it's increasingly human psychology study and market psychology, you know, and fear and greed, then it is actually the, and maybe that's a freezing cold take, but I think that plays a larger role than the actual halving of the block subsidy going forward.

But the cycles and the timing of it, and I think the having still matters, that, you know, that reduction in the supply, that supply shock that kicks it off. But I think more so the cycle is about, and this was the third, chart, more so the cycle is, is what that kind of that long-term holder money, and I should have overlaid the price on that chart, but you can kind of see every top, right, some amount of those holders that came in at the depth of the bear market down 75, down 80, 85%, some amount of those hodlers after 5x, 10x, 20x run up, they shave some coins off. And the combination of that parabolic rise in the exchange rate, you know, that new money influx, that hype cycle,

kind of, you know, maybe running a bit out of steam combined with the confluence of those old holders just shaving a bit off, creates that top, creates that final blow off top, you know, it's that supply of demand and balance. That equilibrium is found. And, you know, all of a sudden there's just, you know, too much supply and the exchange rate crashes, right? And we see this time and time again, right? After the exchange rate falls 50, 60, 70 percent, those long-term holders. And oftentimes there's a whole new cohort of quote-unquote long-term holder smart money. but they scoop up coins and you kind of run it back. And so obviously Bitcoin's more of a macro asset than it's ever been, but it is eerie, right?

Like the timing of it is certainly fascinating. And I'd love to see what it looks like next cycle. Yeah, yeah, me too. It's going to be really interesting to see what happens. Okay, I pulled up this next one. Do you have any other comments on this one? And also, if you do, just explain what we're looking at here. It's kind of the same cycle visualized, right?

It's just, you know, long-term holders, are they in profit or not? profit or loss, their spending patterns or average spending price. And really, I think the interesting part about this chart, the Bitcoin exchange rate and the long-term holders spend price, that's not their average cost basis. That's if those long-term holders part with their coins at all, and they often don't near bottoms. But if they're parting with them, what's their average cost basis? And right now that's about $30,000. And I think the really interesting thing is after the Bitcoin exchange rate surpasses from the bare market lows when long-term holders are an average, underwater and any long-term holders that are spending are capitulating at a loss,

right, on average, after the Bitcoin exchange rate surpasses that level, and there's still, you know, a dominant, predominant majority of those coins are held by people that aren't giving them up, that aren't putting them back into the market. That's when things get really, really interesting in price starts to run like crazy because of that supply, demand and balance it's that simple. When we look at the price action and basically not, getting that full exuberance like we had in 2017 with this last cycle. Do you think that that has any impact on where the coins are currently dwelling in the hands of like really strong hodlers, or do you think that it really didn't matter compared to the previous cycle where we did

have like a blow off top? And do you attribute that to FTX and some of these other bad actors that were in the space as far as why you didn't have the naturally maybe occurring exuberance at the top? Yeah, I think so, because there was kind of an interesting confluence of signals. And we were sharing them back and forth in the late stages of 2021, where like these on-chain metrics, some of them were screaming like, damn, we got some more to run here just compared to like traditionally how these cycles play out. And it's how inelastic the supply is, right?

It's like, you know, well, geez, 70% of coins, like literally aren't budget. and the prices just surpassed 60,000 again and is about to break all-time highs again for the first time in like six months, right? It's like double bubble. We haven't seen it. And, you know, in hindsight, obviously there was a whole lot of leverage, a whole lot of obfuscated leverage, right? It wasn't even transparent. It was FtX, you know, playing with customer money and being fraudulent among many other actors. But it was definitely, I think, like the whole crypto casino played a role.

And I mean, as we should expect, right, that whole altcoin space kind of being a toxic cancer. To the Bitcoin. And I think it honestly serves as like kind of a cloak to what's actually unfolding, right? It's like, oh, this whole casino, right? Like the Warren Buffets of the world and, you know, anybody that's taking a look at Bitcoin is just naturally groups it in with Dogecoin and Shiba Inu and, you know, the clown show that is 99.9% of crypto. NFTs, right? It's like, oh, yeah, you know, just the speculative bubble.

That's where the excess QE ZERP money goes to die is that whole crypto scam. And that causes most of them to miss what's happening. So I do think that, you know, the FTCS of the world, the derivatives, that sort of thing did play a part in kind of the false signal double bubble, honestly. I think really like the checkmate, one of the great guys from Class Note, who's like, probably the best in the game with a lot of this on-chain analytics stuff. Yeah. He thinks like the true top, even though the exchange rate went higher in November than it did in April,

he thinks a true top was around February, March timeframe. That's when like, you know, a lot of the on-chain stuff, started to dwindle in momentum. And I think that's a pretty good take. Now, how about for the setup of this coming cycle? Do you think that because we went through such an abrupt, the head was cut off, that those coins are stuffed into stronger hands or not really?

I think that, yeah, I think we're seeing something really interesting unfold where, and I, you know, it makes for good sound bites. I was on CNBC briefly for a couple of minutes for last call. And it's like coins for one year, two years, three years all at all time highs, right? Like 70%, 55% and 40% of coins haven't moved in three years, two years, one year, respectively. So those are just like, you know, attention grabbing headlines, but there's obviously signal there, right? It's like the supply is inelastic. It's a fixed supply

asset where there's price agnostic buyers and holders of the asset. And the supply side is dwindling. It's like, you know, at a certain point, you can cut back the really, and I'm a big chart guy. You can cut back the good looking charts and visuals and all this other stuff and be like, hey, it's supply and demand. It's pretty easy. Like, this is why it's going up and you don't really have to go any deeper than that. All right. I'm going to go ahead and throw up the next one here. Okay.

Outside of the Bitcoin conversations that we just had, let's talk macro a little bit, you provided some macro charts. Before you describe the chart, what are the big chunk things that you're really paying attention to, Dylan? The big chunk things, well, broadly, I think we are in the late stages of a debt super cycle. We're in the maybe third or fourth inning of an unwind of the everything bubble in terms of, you know, a zero interest rate cost of capital, negative real cost of capital. And not that I think that we, that the system can even exist or kind of unwind from all that. I think they're going to have to aggressively re-inflate things in whether it's the next six, nine, 12, 18 months. But I think the train does, you know, fall off the tracks here as this.

It's honestly taken a little bit longer than I would have suspected, say, at the beginning of 2022. I will say that. I think the economy is a little bit more nominally resilient than I would have thought. But just looking at history as a guide, you don't see wealth destruction and this magnitude. in both absolute terms is the biggest bust ever, and in relative terms, it's still pretty meaningful with debt loads where they are globally. You don't see these things happen,

and then there be no second or third order effects. It just doesn't happen. So I think that that asset bubble, that really it's not a credit cycle, right? Like people comparing it to 2008 and saying, you know, well, look at credit or look at banks. It's like, well, no, it's a duration bubble, right? It's the duration, that long bond went from 1%.

to 3, 4%. And that's had to reprice every single asset on the planet while the liability side of things is fixed. It's like, you know, it's a pretty simple equation. And so, you know, now we're seeing that cost of capital filter in. We're going to see it filter into the interest expense. We're going to see it filter into, you know, the fiscal, the fiscal budget. We're going to see it filter into personal and corporate balance sheets.

It just takes time. I think we do see a not soft landing. I think it's, whether it's, you know, hard or a massive. massive recession is, you know, to be determined. But I think inflation doesn't really go away until you see this labor market start to get ugly. I think that's kind of my thoughts distilled. It seems like it's coming this year, this, whatever this is, I don't know what to think, but I know there's been a lot of just really strange metrics kind of coming through in this past couple months. And I know a lot of the people in Wall Street are suggesting a third quarter

kind of like strong recession. I don't know if it takes even that long. Maybe it comes sooner. I really don't know. But yeah, I'm with you. I thought it was going to come a whole lot sooner than what this has been. It's been very surprising to me, very, very surprising to me. I'm going to go ahead and pull up your charts here. Yeah, let's go ahead and walk through this. So you have United States military spending plus entitlements plus interest expense as a percentage of tax receipts. I love this. here's all the costs, here's what's coming through the door, right? Go ahead and give us what you're seeing here with this chart. It's just kind of overlaid, and this is two pains, but it shows that's me 500 in log terms because it's starting in the 60s. So if you showed it in linear terms,

it wouldn't make any sense. It wouldn't even factor in. And then it's kind of the U.S. fiscal budget. It's the big spending of the federal government as a percent of tax defeats. And the important factor here is that the baseline, you know, the lowest levels that this that this, you know, upper pain, does U.S. spending, the big three spending cohorts as a percent of tax receipts, it doesn't even go below 100 percent. And so what that tells you is that the debt's actually never even even going down. It's always going up because we're the U.S. as a, you know, if you think of it as a person, they're just living on their credit card. And that doesn't matter how much money they make. They always, they always borrow more and they

always spend more. So that's one. And then the second thing is, and I think this is the key thing to take away from the chart, is that look what happens in recessions, right? So basically we know a recession's coming or, you know, with a decent amount of certainty, the data is saying that we're probably at the very least going to see a mild recession. And now, you know, the Fed's actually saying it, right? For the longest time, they're like, oh, you know, no, it's soft landing. It's all good. And now they're saying, okay, yeah, we'll get a mild recession.

So look what happens in recessions, right? And this is, for the first time in 40 years, this is happening with an inflation spike, right? So we see core inflation still running very, very hot, right? like energy inflation on a year rear basis is down like 30%. But the CPI is still what, 5%? Right. So why is that happening? It's happening because the labor market's super, super tight.

And you still, you know, all those dislocations and all that, that fiscal, that fiscal spending that we stuffed into the economy in 2020 and 2021 is still running its course. Still piping hot. There's still excess savings. And those are dwindling. But the consumer is still, I mean, I wouldn't say strong, but they still got some month. Right. So inflation is still pretty hot. Core inflation is still pretty hot.

There's still a ton of job openings, like I think 9 million or so. We got a little bit of ways to go here. But when that recession does come, we know what's going to happen. The government, the Keynesian model. I mean, this is like literally 101 is that they're going to plug the gap by unleashing the fiscal authority of the U.S. government. And this doesn't even, this does not even address the fragility that has been pumped into the, the, overall global system over these past 40 years as they were doing all these offsets to keep everything under control.

Yep. Right. So that's where I'm looking at everything you just described and then thinking about how fragile supply chains and the consolidation of enterprise and just thinking, oh, my God, if we start hitting a recession by the end of this year, like, I just, I can't even imagine what it's going to take from the printer to try to off, because that's their only tool to really offset this. Dude, it's crazy. This chart is awesome. I really like this a lot. Did you have anything? I'm sorry, I kind of interrupted you there. Did you have anything else on it? No. Okay. Let's go to this one here. Yeah. So this is global net liquidity. It's not a perfect measure, but, you know, it's kind of the best we got with some of this public data. There's obviously a lot of kind of the so-called liquidity in the global system. You know, maybe contrast to say Bitcoin, which is a very transparent system. A lot of this is very, very, it's a black box. But we do see, we can see, you know, G4,

central banks, and we can see, you know, the reverse repo facility and the Treasury General account as kind of gauges for global liquidity. So when the reverse repo facility, which still has, I think a trillion or two in there, and the Treasury general account, when those run down, it adds money, it adds liquidity into the system. So, you know, when the TGA has, when the Treasury has a trillion dollars in their checking account essentially, that's liquidity that they've taken from the system, right? If you pay taxes, I think today's tax day, if you pay taxes, that's liquidity coming out. And when they, you know, spend that back into the economy, that's liquidity coming in.

So we can just kind of aggregate this and kind of get a gauge for global net liquidity. And there's a bunch of different ways you can measure this. But essentially, they kind of just charted this and then the 12th month change. And I think of the next one, I think in slide seven, I actually overlay the S&P 500 with this. And it's, you know, since. And I think if you even go basically to the great financial crisis, it's, you know, it's a one-to-one, not correlation because it's not correlation isn't causation. and you can't chart two different time series and say that they cause each other.

But essentially this kind of confirms, right? It confirms via the eye test what we already know, that capital markets, as we know them today, have been zomified. It's a passive zombie that's completely dependent on global liquidity. Global liquidity is contracting. Markets are falling. Global liquidity is pumping.

Money's injecting into the system. Capital markets rally. That's the game. And anybody I think that's pretended that's not the game. is fooling themselves. I love this chart. This is a great chart. Isn't it amazing like when you're looking at the S&P 500,

just like how it's, if it was like a signal, you know, how it's just like amplifying as you're going through time here. I just can't imagine what this is going to look like in the coming five years. But great chart. Let's go to this one here. Yeah.

So this is, so I got a bunch of going on here. And the top chart, the top pain is US total debt, public debt to GDP, at 120%. There's some great stats out there about when sovereign nations see their debt rise above 120%.

There's basically, I think this stat was in 2020, but it was like 51 or 52 out of 53 of these, or 51 out of 53 of the nations had defaulted. The two that hadn't defaulted. And by default, I mean in implicit or explicit terms, explicit meaning they say, nope, sorry, you know, sorry creditors,

you're not getting your money back. Implicit default meaning, okay, here's your money back and like, you know, printing it and the money's worthless. Yeah. And the two cases that, you know, that hasn't happened is Japan and the United States, right? So ask yourself, like, as a creditor of the U.S. government, anybody that holds a bond or even treasury bills. And I say this is someone that has, you know, a little bit of cash and short end treasury bills at, you know, four and a half, five percent, whatever it is. But if you hold long duration debt, right, like, and you're getting, you know, three, three and a half percent yield, how is the U.S.

going to pay you back because they're not going to default. You know, like the debt ceiling's coming and everybody's kind of shaking and quivering about, you know, what happens if they don't find a resolution to the debt ceiling? They will. Of course, they will. The debt ceiling will be raised, of course. But it's going to be paid back by debasing the currency. It's just like, it's literally just a simple math equation and anybody that hasn't kind of run these numbers. It's kind of interesting, present. I should have included this in the chart. I encourage everybody to go to the CBO, Congressional Budget Office website and look at their model. for the next 10 years and look at the projections for the employment, unemployment rate,

for inflation and for, and not even just the next 10 years, but they actually map out what they think the next 50 years or so looks like. I may have total debt, public debt to GDP, going from 120% to about like 200% over the next 40, 50 years. And that's just a laughable projection. They don't even hide what they're saying. It's saying that the debt's up only, the inflation, they think it's going to actually go and go back to 2%, but even at 2%, right, that's still compounding, the money's still losing

value. And then they think, you know, and then they think, you know, unemployment's just going to have a little blip and then go back to 3 or 4% forever while, you know, Social Security, the Ponzi scheme continues to go on. It's like, it's a pretty laughing stock projection and system, but it's, you know, anybody that's actually looked at these numbers knows it's completely wrong. It's done, you know, by academics in a boardroom with no basis in reality. So yeah, Like as a long-term oriented thinker, it's like, why would I hold long-duration debt for other than just like, you know, a skimpy trade? Right. Like, there's no reason.

And I don't think there's anybody coming to the table within the government to raise the flag because if they do and they say, hey, start using these numbers at higher inflation rates and whatnot. What's going to happen is everything that they're trying to do is going to become unaffordable except for maybe three things. And so whatever those, all those other things are, are going to be canceled or like if there's actual real. planning taking place. They're all going to be canceled. They're all going to be killed. And then the couple of priorities it would still remain inside of that budget that is actually left would be the only things that would be funded. And so this doesn't work from getting votes from your congressional area that maybe has the work being performed for all these things that would be canceled if we start using numbers from reality. There's this disincentive from all the actors around government

to nod their head and say, yeah, it's 2%. These are the numbers, so you can see how it's just the incentive structure is just so broke all around these people that are feeding the numbers into this system. They don't want reality. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up and customers now expect proof of security just to do business. That's why VANTA is a game changer. VANTA automates your compliance process and brings compliance, risk, and customers trust together on one AI-powered platform. So whether you're prepping for a SOC two or running an

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and the job openings per unemployed persons, sorry, which and also, by the way, like after the COVID shock, there was a big percentage of the work. force that just essentially retired or, you know, isn't on the official hunt for for full-time jobs. And there's actually like, you know, many people working two jobs, right, or a bunch of part-time jobs. You can argue whether the actual unemployment rate is three and some change percent. But I think this is just kind of a short-term gauge for we got some, we got some pain or some kind of contraction in the labor market first before or this thing really hits the fan and they

and they turn on the printers. Yeah, and I mean, based on the previous cycle, it's looking like that's a year and a half kind of process, two-year process for the numbers to really kind of fully capitulate down. Yep. Okay. And here we go. This is the, look at that. Look at that. Now, what do you think about the 3.5, Dylan?

Like what I think about the number? Yeah. Exactly. Yeah. I mean, to be honest, I don't think that the labor market is the strongest it's best. been in 50 years. But, you know, officially in the data, right, it's saying the flavor market is the tightest. It's been in 50 years, right?

It's like the same thing with the inflation rate. It's like, well, is inflation rate right or wrong, CPI, right or wrong? It's like, well, you know, these are the numbers are overlords at the Federal Reserve are looking at and referring to. So the kind of the meta is this is what this is the game, right? So, I mean, anybody that's long-term oriented doesn't really care. Like if you're thinking about, you know, and buying Bitcoin and holding it for two generations. Like, I don't care what the unemployment rate is. Now we're going to be next year. But

I think they tighten until the labor market sees some pain. I would love to see a breakout of highly skilled labor versus, you know, completely unskilled labor and what the metrics look like from, you know, an unemployment standpoint. And that's something that I haven't really dug into. But I think you could maybe see some really interesting trends there, too. I suspect you would see some interesting trends there. Okay, the M2. Yeah, M2 is, I mean, it's not a perfect measure of money supply, right? There's bank reserves and everything else in there. But, I mean, you can just kind of take a left end of the Belker of approach here, right?

We're in a monetary system that requires perpetual credit expansion to persist and exist. When money supply contracts, things break. Like the kind of the buzzword or the macro thesis in 2022 when everybody was referring, including myself to the Fed tightening cycle was like, well, they're going to tighten until things break. And like, you know, people would be like, well, that's a cop out. You know, what's going to break? And it was like, well, we don't know. We don't know what's going to break.

And what broke, at least in the short term, I think it's kind of the first warning shot of problems underneath the hood was what broke was the banks, unrealized losses on their bond portfolios. That's what broke. What broke was the collateralized guilt in the pension system in the United Kingdom. That's what broke, right? The duration losses on those bonds as they had to recognize, realize those losses, as that collateral got marked to market, that's what at least temporarily broke.

And we don't know, I think there's more to break as this current cycle plays out. Everyone's saying commercial real estate. I know you've posted a couple charts online about that. What are your thoughts around that one? I think private equity, I mean, commercial real estate and like a lot of these are liquid kind of like Blackstone type investment vehicles. The mark to market is laughable. I don't hyper focus on it too much.

But like, you know, it's like private. equity as this like magic vehicle where you outperform public equity markets on, you know, a lot lower realized levels of volatility is not based in reality actually whatsoever. And if there's any sort of redemptions, you know, for the black rocks or black stones of the world on their private portfolios, they're going to realize that they're going to have to take quite the impairment loss. Yeah. No doubt about it.

I'm just curious on the timeline for something because it's so illiquid relative to, you publicly traded equity and bonds and whatnot. So, but everything I'm reading, that's where it's, that's where the next shoot of drop is is coming from. And then the, the compound impact to community banks or the smaller banking sector because of their exposure to commercial real estate, I guess is just nuts. But, hey, let's transition just a little bit into a different topic. I know you were doing quite a bit of research on finance and some of their situation, especially coming out of the whole FTX debacle, where do you think they stand right now?

What kind of research have you done recently? Is this going to be an exchange that kind of gets by through the bottom of this cycle and continues to exist and is a key player? Or do you see more pain on the horizon through them? Yeah. It's kind of interesting because the crypto space is unique where, you know, it's one of the few spaces where you call a spade a spade and people get mad at you for doing so. And maybe that's not unique to crypto, but at least that was what I kind of came to realize after the FECS debacle, which, you know, was identifiable, at least in the late stages of it, if you were paying attention to the numbers and just the math of it and looked at it with an unbiased view, right? Like that would meet a balance sheet and all of that. I was like, all right, well, let's take a look at the next guy, right? We look at finance and, you know, I log on to coin market cap, which I rarely ever visit to look at, you know, the cesspool that is the crypto market. And, you know, there was BNB. and I took a look at the USDA chart and it was looking, you know, abnormally strong. It was up 9x, you know, since the start of 2021.

I looked at it in Bitcoin terms, and this is in late November. And B&B, BTC was chugging to new all-time highs on basically every day. And so that was like, for me, it was a really big red flag in the sense that crypto is, I guess you could say maybe in a similar way to like, you know, certain facets of the equity market, right? Like if something trades with a high realized volatility, you could talk, you know, maybe think about like an arc invest or, you know, high beta tech stocks, right, compared to like low volatility value, right? If it trades with a higher volatility to the upside, you know, trades with a high beta, high realized volatility, high implied volatility. It usually, I mean, this, it's, you know, finance is similar to kind of physics, gravity in a way. It'll trade with a higher levels of volatility to the downside, right?

Like, this is just how it works, or how it should work in theory. And, and, you know, Binns Coin, right? B&B outperformed basically every single crypto, including Bitcoin, by a large margin in the bear market, where, you know, it served as massive beta, just like a lot of pretty garbage, of liquid alt coins did in the bull cycle. And in the, in the bear cycle, the thing that traded with three times the realized volatility of Bitcoin in the bull market, right? So it traded as a beta to Bitcoin.

but massively outperformed Bitcoin on the upside, right? And you can just attribute that to illiquidity and flows. And to the downside, Binance, BNB, Binance coin, traded with the same level of volatility as Bitcoin to the downside. And actually outperformed the B&BTC went up. It outperformed Bitcoin to the downside. So for me, that was a big red flag. It was, okay, there's something wrong with this exchange rate.

But I don't see a world where B&B, this token that was spun up from nothing, that Binance and CZ gave 50% of the allocation to themselves that only trades really on Binance, that started to go parabolic at the same time that FDT did, I don't think that the market exchange rate is real on this. And CZ says that they, you know, he has 99% of his net worth in the thing on Twitter and 1% in Bitcoin. And obviously that could be like that probably is a lie, or at least, you know, is a little bit of an exaggeration or hyperbole. But CZ says that they never leverage against it and he never sells it. And for me, it was just like, that was quite the statement because, like, if I think about

the two things that you do when you buy an asset, you buy, like, particularly a money, right? You buy, like, if you buy Bitcoin, you either buy it to part with it at some point, or you use it as collateral to leverage. There's only two things you can do with Bitcoin. Like, like, you either sell it or you leverage against it to borrow capital. That's it. That's all you can do. And so he was like, you know, we never sell it.

and we've never used to collateralize against. So, okay, that's quite the statement, considering that B&B was worth $100 billion at the top of the market. So you never did anything with it, okay, I guess. And so, you know, here we are. When I first put out that kind of the tweet thread that was breaking down my concerns with B&B in particular, but it was worth about $3 million Bitcoin.

I think it's worth about $1 million right now in terms of the B&B market cap and Bitcoin term. And so, like, you know, people were saying, like, you were rooting for Binance to fail, you know, you thought you were going to like, you were encouraging a bank run. It's like, no. You know, CZ says they hold every asset one to one. I'm saying people should evaluate counterparty risk and they should, you know, assess this considering what happened in the space. They have a whole lot of crypto assets. They have, you know, 500,000 Bitcoin. They, you know, they published a proof of reserves. They have all this Ethereum and stable coins. But we see that there's plenty of question marks, including of which you've published a proof of reserves audit. That's, you know, they published a proof of reserves audit. That's. That's what they called it. There was no proof of reserves. There's proof of assets. It's like, here's my assets, guys. And then someone said, show me your liabilities.

And they said, ah, well, that's hard to calculate. There's also instances, right, like FDX collapsed. CZ puffs out of his chest. It says, we're really strong and we're different. You know, everybody come to us. And actually, here's a billion dollars for industry recovery to help the industry flourish and to help the crypto economy start fresh, right? We're going to bail out people that need it.

Sounds familiar, right? all of a sudden, I'm like, okay, like, let me just take a look here. A billion dollars of BUSD, great CZ. Thank you for being very generous and altruistic. And I clicked on EtherScan. I clicked the billion dollar BUSD deposit, which was in a brand new white labeled address on EtherScan. And it came from Binance Wallet 8.

And Binance Wallet 8 is a customer funds wallet, right? Okay. And in a kind of a sleight of hand where like no one really seemed to notice, a couple people called them out on it. And Binance releases a blog post, the next day and was like, you know, hey, to clarify, like, and they said this in, you know, four paragraphs of jargon and word salad, they said, oh, to clarify, you know, these are not customer funds. These are corporate funds that we keep in the same address as customer funds because

our security practices are so good. And I was just looking at this and I'm tweeting like, guys, this is a massive red flag. This literally makes no sense. Like, this is assonide. It's crazy. Security practices. Like, what are we talking about here? At the very least, they're severely incompetent and at the very worst, this is, you know, the F word. This is fraud. Yeah. Right? Like, and people were like, bud, bud, you, you know, you were rooting for them to crash. And at that

point, I kind of just decided to leave it alone. I'm like, I'm not going to beat a dead horse here. I've aired out my thoughts. I'm not rooting for anybody to, you know, I'm not rooting for people to lose money. I'm not rooting for innocent people that probably wouldn't be able to withdraw their funds and know what's going on to lose everything. I'm just putting it out there and using my

public audience and presence to say, hey, this is what I see. It doesn't add up. There's a real clear history here of actions that we literally just saw this other guy do. And they collapsed. And Binance is an order of magnitude bigger. So I think it is the problem. There's plenty of question marks.

And I don't think there's many answers. But I don't think there's a high probability that those problems get all aired out. At least not without some interference from the three-letter agencies, which probably might come. And I should clarify that. like I'm in no way a, you know, a simp for the, you know, the heavy hand of the state. Yeah, yeah, yeah. But I think that's, you know, that's the five-minute rundown of some of those stuff. From a probability standpoint, as you're looking at like what comes next from the state,

do you see them continuing to ratchet down on Binance? Or do you think that they're just so large and lawyered up that they're just going to be able to defend themselves against the state, at least in the U.S.? It seems like the U.S. is coming down hard on them. Yeah. So, I mean, it's interesting, right? Because BUSD was their, the tether's existed and persisted. And there's obviously, there was the past question marks of tether.

And, you know, there's still people that say that tether is, you know, a black box to which, you know, we could probably spend some time talking about that. Maybe we go there. Maybe we don't. But BUSD was kind of the Binance wrapped stable coin or the finance, you know, white labeled stable coin that Paxos issued. And that got up to like $20 billion with the value. value. And, you know, CZ did this nice cool trick where, you know, they took these assets, not just BUSD, but also Bitcoin, ether, all these other crypto assets, put them in a smart contract address and then issued the same tokens on B&B chain. And, you know, the funny thing was,

we can see that they took this collateral, this deposit address that was supposed to represent the peg, right? So, hey, I'm going to stick this in a one-way peg and then I'm going to issue it on another chain. And we can see that they were actually actively changing those addresses. Sometimes they were over collateralized. Sometimes those assets were under collateralized. And Paxos and the SEC basically, not the SEC, I think it was the New York. It was a New York regulatory body.

Basically, I mean, the data forensics came in there, said, oh, wait, you guys were actually issuing this BUSC token under collateralized. You were minting billions of dollars at a time of free money, at least temporarily, unreserved. They basically came in and said, okay, you can no longer create BUSD, you have to unwind this and you got a year's time to unwind it. So BUSD is gone. Now, this dominant stable coin of choice is TUSD, TUSD being, if you go on the website, the banking partners of TUSD are signature, Silvergate, and I forget the other, I forget the other one. So I think the TLDR is the dollar rails are going to, and we've already seen this, the dollar rails on

Binance and really any crypto actor that doesn't have a sterling relationship with regulatory bodies is going to get that their dollar rails are going to get beheaded. Maybe they can, you know, stay afloat and, you know, figure out and, you know, maybe they deal with stable coins or crypto assets natively, whatever it may be. But a lot of these systems, and not just finance, and not even even referring to Binance, but a lot of these games, FTX, they could persist and exist because they had fresh inflows of dollar capital to keep the gig going. And so Finance obviously is a big war chest. Their customers at least have a big war chest.

I don't think they collapse tomorrow. But from a probability perspective, I think at the very, very least, and this was the point in my original thread regarding finance, was that the exchange rate of B&B, BTC, the exchange rate of this token is a lie. The market exchange rate is not real. And so I would love to short the thing if I could. The problem is the only real place you can trade the thing is on Binance.

Right. So, you know, you're trading against CZ, and you're trading against that team over there. So, I mean, I would love to borrow a large film of this thing. In fact, I could find a reliable counterparty, but that's not, I don't think that's in the cards. But when you're playing against, I mean, Dylan, when you're playing against somebody that you think is a bad actor, like sometimes they can carry that shenanigans out way longer than your cost to borrow. So, yeah, yeah, definitely want to steer clear of that one.

So, Dylan, when we think about Fidelity, you know, huge staple of legacy finance, they're now people can go on there. They can buy Bitcoin. They continue to hold the Bitcoin. You can't withdraw the Bitcoin, which I think is real. So you're buying a paper receipt of Bitcoin that Fidelity is hopefully holding on your behalf. When I look at that model, I obviously don't like that model. I want people to be able to withdraw and take self-custody. Is this fidelity dipping their toe in the water to make sure that they don't piss off regulators and to make sure that they're doing everything according to regulatory standards so that they're not pulling a finance or a coin base where they're just running with scissors and potentially getting

themselves in trouble so that they have a dominant position in the space. Or is this the Wall Streeters trying to get all of this under control and never going to offer self-custody to their customers to be able to conduct withdrawal so that they can continue to have a paper Bitcoin market and basically turn it into gold, which is highly manipulated. Well, I don't know that it's highly manipulated, but it could be highly manipulated via a paper derivatives market. Yeah. I mean, I don't have any inside info into the fidelity operations, but I will say that, as you

know, very well, that the key difference between Bitcoin and gold is the ability to to self-custody in a matter of minutes for basically no cost, right? I can move a billion dollars of Bitcoin for five bucks, and I can settle on-chain in 10 minutes. You know, worst case, it settles in an hour, and you can pay up to have it settle in the next block for no marginal cost whatsoever. Because of that, I think that even if Fidelity doesn't have those withdrawals on now, the market will demand it,

and then they won't be in a dominant position if they don't give that feature. Like, so it's obviously a different customer base, but we've seen a lot of entrance in the space like from like legacy fintech apps, Venmo, PayPal, Robin Hood. I'm not sure if Venmo has turned on those withdrawals. I think someone will have to, as they're listening, will have to correct me on this. But I know Robin Hood, which was kind of like a black box for their crypto operations

for a while. You could buy Bitcoin and Ether and Dogecoin and whatever else, but you could never withdraw it. The demand was so strong from their customers. They got so much inbound. When can we withdraw? When can we withdraw? that they finally enabled it.

I'm sure there's still a lot of people that hold it on that site, but I think from an institutional space, there's not as much of a demand maybe to hold the Bitcoin on a cold card, but the ability to do something almost makes the fidelitys of the world have to play by the rules, right? And not to say that they wouldn't play by the rules, but if you, you know, if I'm buying gold on your behalf, Preston, and you never redeem it because you have no ability to redeem it or withdraw it,

you know, I may or may not buy the gold if you ask me or may not, right? Like so, but with Bitcoin, if you can, if you have the ability to do something, then I have to, I have to put myself in a position where I have to honor that if that request comes. I think that's fundamental difference with the Bitcoin market versus the gold market, which a lot of people like seemingly don't grasp. I've had like my mainstream media appearances of the last, you know, six months or so, literally every single one, not even mainstream, but just, you know, like media,

whatever. Gold is always brought up every single time. Well, it sounds like you're describing gold, Dylan. It's like, well,

no, I'm not. I actually have a smartphone in my hand. And I can't own gold on this smartphone. Can't verify gold from this smartphone. And so it's pretty obvious to me.

It's obviously to you where the game is going. And that no one's going to want to take delivery of, you know, five tons of gold. But I can take delivery of a Bitcoin transaction

for my smartphone or my laptop. That's connected to your node to do a full audit that it's real. Yeah. Yeah. It audited the entire supply of Bitcoin and all of the fancy charts that we showed at the beginning of the Bitcoin supply and all these exchange metrics, you can pull that data from

that node and it's only 200 gigabytes of data. You can have it on a MacBook, right? Like, it's a pretty elegant, beautiful system. And obviously, seemingly, there's still a massive education gap about what this thing actually is. What's the status of the mining? I think the last time we talked, the mining industry was looking nasty. The price was way down.

The hash rate was significantly high. It looks like they've gotten a little bit of price relief, but how would you describe that right now if you were going to give the status of the mining industry? I think we talked in late November, so it was definitely very bleak. I think hash rates are still screaming towards all-time highs. The price bump has obviously given miners a little bit of relief. I think hash price, which is minor revenue per X a hash, kind of standardizes minor revenue in Bitcoin terms or dollar terms relative to

hash rate. That's about 40% off the highs. I'm sorry, 40% off the all-time lows. And this thing over time only goes lower. As supply insurance drops, as hash rate goes up, that hash price metric continues to go lower. So they've seen some relief. But I think really when you're thinking about minors, right,

when you're evaluating the minor investment, and this is for, you know, could be public equities, it can be physical. Not only like, I mean, if you're actually deploying physical A6 or buying public equity, you have to understand that you have to be a supreme operator to actually outpace this Bitcoin thing over the long term, but over the short to intermediate term, regardless of, you know, how efficient you are at the margin. It's really a game of just price outpace hash rate or just hash rate outpaced price. Because if hash rate is outpacing price, you're going to probably get wrecked. And that's why, you know, it's the most competitive business in the world, even though it's

still a very niche small market compared to other industries is because hash rate continues to go up forever. And those ASICs that you bought in two years, in four years are going to not be bottom barrel, but they're going to be far from the top of the line. And, you know, and those, those ASICs don't get thrown away. They get deployed somewhere else where the marginal cost of energy is cheaper. That's right. So it's a brutally competitive business. It's not very well understood. I, you know, I would love to see a poll of how many people on Wall Street could describe the difficulty adjustment if you asked. Because I don't think it'd be very high. But, you know, let alone have them describe how it's incentivizing cheap, free energy around the world for where all those rigs are

being deployed. Because if you're a minor and you own one of these rigs and it's four years old, like you're looking to sell it somewhere where somebody's getting energy for free. Right. It's just, it's really fascinating to see the incentive around. that alone and the incentive for setting up shop in an area where you really have a competitive moat with respect to cheap energy. Yeah. I think a lot of the kind of a more long-term thesis is that these big box public, you know, minors, you know, I think some of them will do okay. But I think it's going to be really hard to be, you know, a massive, massive operation, physically domiciled in one or two locations. One, because of regulatory risk and kind of

jurisdiction risk. But two, it's just, it's a race to the bottom. Right. And even if you're, you know, located and I'm not even taking a shot or a job at a specific miner, but even if you're at like, you know, Rockdale, Texas with cheap power, there's somewhere with cheaper power probably, you know, that's going to be able to mine 24-7, probably for no cost, right? Never mind, like, you know, state sponsored actors because that's another rabbit hole.

But, I mean, I think the miners are interesting. I'll probably, uh, probably scoops them up in the next year or so maybe after the having as a trade. But I mean, you plot any of these things in Bitcoin terms. Take all the miners. You can go in Trading View or another website, take the tickers and then plot them, divide that ticker by BTC, USD, and then look at a long-term performance. And they all underperform, right? That's the signal. And it's not like, you know, it's not a shot at marathon or riot or clean spark or any of them. I just listed off three, but it's just, it's just the reality that hash rate is going up forever. Yeah. And the supply insurance is going down. And so on a long time frame,

cyclically these things will outperform Bitcoin by 5x 10x during 3, 6. That's what I was just going to say. I was just going to say, but if you're looking for something that has a lot of vol and you're trying to really get fancy with it, well, have fun because there's a lot of vol. Yeah, totally. Not recommending that, by the way. And one other thing, the science is conclusive down there in Rockdale, I hear. Yeah, that was honestly, that was just absolutely magnificent. by Pierre and the guys at Riot.

That was just great. And it was amazing how many people missed that just a joke that, you know, completely over their head. Over their heads. hilarious. I actually had it. I have a T-shirt that's coming that, that is a picture of Pierre holding up the monitor, the CO2,

and it says the science is conclusive. Awesome. Yeah. Bitcoin doesn't emit carbon. Oh, my. hilarious. Dude, we could talk all day. I really appreciate.

this. This is always fun. I always learn a ton from you and because you just have such a beat on what's happening in this space unprecedented. And it is such a delight to sit down and chat with you, Dylan. So thank you for making time and coming on on the show. Appreciate the invite back, Preston. It's been an honor. Give people a handoff if they're, if they're just hearing you for the first time. Cool. Yeah. You can find you on Twitter at Dylan. Looker underscore. I publish research with Bitcoin magazine pro doing a couple other things. I'm also on like noster. I don't even know how to share that. Not on as much as you or as much as I should be. But yeah, I got a couple cool things in the works working on some Python stuff like we talked about at the beginning. So hopefully we'll

be able to share some more with you guys. And I can also share you later tonight some of the links to the trading view layouts that I shared. Oh, awesome. That would be fantastic. And we'll have all that in the show notes. Dylan, thank you for making time and coming on the show. Thanks, Preston. See you. If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use. Just search for We Study Billionaires.

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